State Steps Up Efforts to Collect a Sales Tax Owed by More in a Digital Age

Line 59 is among the more disregarded blank boxes on New York State’s income tax form. It is buried on the next-to-last page of form IT-201, inconspicuously near a line for charitable donations to a wildlife fund and one for a surcharge on part-time residents of Yonkers.

First introduced in 2003, Line 59 — which requires residents to list the amount of unpaid sales tax that they owe on purchases from out-of-state retailers — has received more attention each year. But it remains largely neglected: Only 5 percent of the approximately 9.6 million residents who filed state income tax returns for 2006 listed anything owed on Line 59, according to the Department of Taxation and Finance.

Now, lawmakers in Albany are stepping up efforts to collect state sales tax on the front end from out-of-state online retailers. The Legislature approved a measure last week that requires online retailers to collect state sales tax and remit it to New York State. The state estimates it will collect about $50 million from such online retailers.

New Yorkers, meanwhile, are still bound to pay sales tax on the purchases of items that they use in the state — regardless of where the purchases are made, said Thomas Bergin, a spokesman for the Taxation Department. But the lack of attention paid to Line 59 comes as little surprise.

“It’s kind of dense and nuanced stuff,” Mr. Bergin said of the law regarding Line 59, which is technically reserved for listing the “sales or use tax” one owes. “If you went out of state and bought something and didn’t pay sales tax but it is in your possession in New York, you owe the use tax,” he said. Though the “use tax” has been part of state tax law since the 1960s, Line 59 (actually Line 56 on older tax forms) evolved from the growth of digital-age commerce, as more and more items are being bought and sold across state lines via the Internet.

For those with lax record-keeping skills or no receipts from online purchases, the Taxation Department provides a use-tax calculator to help better estimate the amount of sales owed. In those cases, the estimated tax is based on a filer’s adjusted gross income and has a sliding scale that ranges from $5 for those with incomes up to $15,000 a year to $56 for those making between $100,000 and $150,000.

The new law requiring online retailers to collect sales tax up front is more for businesses doing more than $10,000 a year in sales, like Amazon, rather than, say, an independent seller on eBay, Mr. Bergin said. One difficulty in knowing just how much sales tax is going uncollected from out-of-state retailers is that many of them simply do not report their sales in individual states.

Of the top 10 online retailers doing business in New York, only two are not registered to collect state sales tax: the No. 1 retailer, Amazon, and the No. 10 retailer, Newegg, an electronics dealer, Mr. Bergin said.

The Taxation Department said the state could enforce the new tax laws on major Internet retailers by proving that they had a physical “presence” in New York and, thus, were subject to tax laws and an audit if that presence were proven.

Amazon, for example, is not required to pay the state taxes because it does not claim to have a brick-and-mortar establishment in the state, according to a 1992 United States Supreme Court ruling.

But the state may challenge companies like Amazon that operate through an affiliate, Mr. Bergin said.

“We are still reviewing the final language from Albany regarding the proposed change to sales tax collection requirements,” said Craig Berman, a spokesman for Amazon. “At this point, it would be premature for us to comment.”

As for Line 59, Mr. Bergin said the Taxation Department had not conducted an audit based only on that item. But that does not mean Line 59 has not been considered along with returns that have other potential problems. While many online buyers do not identify how much they owe the state, the longer Line 59 appears on tax forms, the more people take notice, he said.

“If you’re doing your tax form yourself, it would be hard to avoid entering zero at least,” Mr. Bergin said. “And if you’re using a paid preparer to do your taxes, they would be entering something for you. I wouldn’t ignore it.”

Still, Line 59 remains a mystery to many.

“I wasn’t aware of it at all,” said Chris Hernandez, 23, a musician who lives on the Lower East Side and plans to join the Navy. “This is the first I’ve heard of it.”

He added: “In the past three days, I’ve bought stuff over the Internet — out of state.”

David S. Hirschman contributed reporting.

A version of this article appears in print on , on page B7 of the New York edition with the headline: State Steps Up Efforts to Collect a Sales Tax Owed by More in a Digital Age. Order Reprints|Today's Paper|Subscribe